Synopsis of the Issue
Kazuri Handcrafted Jewellery is one of the leading manufacturer and distributor of handmade jewelleries in Africa. Situated in Nairobi, this firm has been exporting its products to the United States, Canada, South America, Mexico, and the Caribbean. Its exports are sold by exclusive distributors in these countries. This firm has experienced a massive growth over the years. Its initial targets were tourists who were coming to Kenya from all over the world.
However, it expanded its business to the countries named above, and its performance has been impressive. Although the firm has been selling its products to Europeans who visit Kenya, it is yet to come up with a strategy of capturing the European market. This research will focus on how this firm can capture the British market despite some of the challenges that it may face in this process.
It is important to understand the industry average and how this firm is performing within the industry. Most of the firms in this industry are small or mid-sized firms with an average of 50 or less permanent companies. However, other related industries dealing in exotic products are larger companies. Kazuri is performing very well in its current markets, and the management seems to be comfortable with the firm’s performance.
However, Lymbersky (2008) warns that firms should avoid the temptation to remain in a particular region and ignore others only because it is successful. This scholar says that the time a firm enjoys success is the most appropriate time for it to seek new markets because of its strength. There is a massive demand for Kazuri’s products in the British market. Given the uniqueness of these products in this country, this company will find it easy to penetrate the market without serious competitive threats.
Some of the international trade theories support the move to capture new international markets as a way of gaining competitive advantage over other business rivals. According to Absolute Advantage Theory, exportation of a product should be based on the fact that the cost of its production is very efficient in the country that exports it. It is important to note that the jewelleries exported by the firm are handworks that do not require any machine in the entire production process.
This is what makes the product unique. The cost of labour in the United Kingdom is almost ten times that in Kenya (Jain 2001). This means that the cost of producing a single jewellery of this nature would be close to ten times more expensive in the United Kingdom than in Kenya. This means that it is more realistic for the British consumers to import this product than to manufacture it locally, just as the Absolute Advantage Theory states. Kazuri should, therefore, expect a friendly business environment in the United Kingdom.
Market Entry Recommendations
It was important to conduct a detailed research and come up with a recommendation of how this firm will enter the market in the United Kingdom. The country is one of the best regions that Kazuri can export its products to because of the size of the market and the purchasing power. However, the management of this firm must come up with appropriate export-related strategies that would make the entire process simple and successful. Upon a careful analysis, we developed a number of recommended strategies that can be used by the firms to enter the market.
The entry strategy that this firm will use may define its success in the new location. Although its products look different in the market, they will pose a direct threat to the existing jewellery brands that are already in existence. According to Klug (2006), firms always treat threat of substitute products as a threat to their own existence. Kazuri should, therefore, know that although it will be presenting a product with a unique niche in the market, it will have potential firms that will consider its products a threat. The management should choose an approach that would expose it to minimal competitive threats from some of the well-established firms.
The best approach would be to develop a strategic alliance with the top fashion outlets in the new region. Oasis is one of the most trusted fashion outlets in the United Kingdom. Although it also has its own brand of jewelleries, the firm will offer it unique products that would not pose a threat to its existing products. There is a section of the market, especially the middle class that prefers the synthetic jewelleries that are already in this firm’s stores. However, some customers would go for nothing less than the handmade jewelleries. These two firms can work as a team to offer the customer all-round products that will meet the varying needs of the customers.
Direct Market Entry
The management of the firm may also consider going directly to the market as an exporter in this country (Vasudeva 2006). This method is very expensive, especially the initial costs needed to register the firm, hire employees, and rent an outlet. The firm should also be ready to deal with the competitors in the industry.
Tielmann (2010) describes cross-border collaboration as a strategy where one firm enters into an agreement with another firm in another country to help sell its products in that particular country for mutual benefit. Kazuri will find cross-border collaboration an important strategy that can help it avoid numerous procedures and costs when entering the new market. Jewelleries are better sold alongside other fashion products.
It is important to appreciate that there is need to export these products because of the advantage the country has over the United Kingdom in terms of factors of production (Daniels, Radebaugh & Sullivan 2010, p. 61). As mentioned previously, it would cost less to produce these products in Kenya than it would if production were to be done in the United Kingdom. The country has readily available raw materials which makes them cost less. Other factors of production also cost less in this country.
Arguments against the Recommendations
It is important for the management of the firm to conduct a comprehensive risk analysis related to the recommendations made above when getting into the new market in order to develop mitigation measures. Some of the above strategies come with risks that should not be ignored by the management. Strategic alliance is less costly, but it will limit the control of this firm in the new market. Most of the operational decisions will be made by the local firm. Direct entry will be a costly venture that will force the firm to have its own outlet shops and employees. Cross border collaboration would reduce the firm’s ability to control its operations.
Arguments in support of the Recommendations
Kazuri has had a growing market, and considering exporting some of its products to United Kingdom is a timely decision. The firm needs to expand its market beyond the regions it currently operates. It would be necessary to understand the appropriateness of some of the entry strategies proposed above. Strategic alliance strategy will cost less because the firm will not need to hire its own employees in this region or start its own outlets (Neubert 2013, p. 90).
The strategic partner will do most of the operational activities. Direct market entry is advantageous because it gives the management or the firm full control of the operations in a new country. Entering into cross-border collaboration with fashion stores will not only cut costs of operation, but it will make the products popular in the market within a short time. The three strategies may be considered, but the most appropriate of the three would be a strategic alliance with a fashion firm in this country.
Implementation of Recommendations
The management of Kazuri must come up with the most appropriate strategy that will help it implement the recommendations made above. The first step in implementing the above strategies would be to embrace ethics. The management must embrace ethical issues in its strategic decision-making process.
The management should be able to resist the temptation to bend the law during the process of entering into a new market. Issues of corruption should be completely avoided because they may hurt the image of the firm in the future. Although some of the policies in this country may appear punitive, it is the responsibility of the firm to obey them as long as they are still in force (Tallman 2009).
When the firm is given a trading permit, it should ensure that its operations are in line with what is described in the permit. When the management decides to form a strategic alliance with some of the existing British companies, it should ensure that the relationship is based on good faith without any ill intentions. For instance, it would be unethical for the management of the firm to sign an agreement that states that the alliance would exist for ten years, only to change the mind within the first years because of the popularity of the products.
The management must also understand that logistical issues that may affect its operations. The products of this firm will have to be transported from Kenya to the United Kingdom either by air or sea transports. The management should find the most appropriate way of transporting these goods. Although sea transport may be cheaper, the time it takes to reach the destination is too long (Czinkota & Ronkainen 2013).
Given the size and weight of the products, air transport would be more appropriate. Information technology may be important in monitoring the movement of the products from the source country to the United Kingdom (Gillespie & Hennessey 2011). The following are some of the issues that the management should observe when implementing the above strategies.
- The management must start by defining the need for this firm to enter into this new market. The need must meet the mission and vision of the firm.
- The management of this firm must understand the impact of the international trade laws on its move to capture the United Kingdom’s market.
- The management must follow the set laws and regulation both at national and international levels as a way of being ethical in its operations.
- The management must understand appropriate methods that it can use to cut its operational costs while in this new country.
List of References
Czinkota, M & Ronkainen, I 2013, International marketing, South-Western Cengage, Learning, Mason.
Daniels, J, Radebaugh, L & Sullivan, D 2010, International business: Environments and operations, Pearson, Boston.
Gillespie, K & Hennessey, H 2011, Global marketing, South-Western Cengage Learning, Sydney.
Jain, S 2001, International marketing, South-Western, Cincinnati.
Klug, M 2006, Market entry strategies in Eastern Europe in the context of the European Union: An empirical research into German firms entering the Polish market, Deutscher Universitäts-Verlag, Wiesbaden.
Lymbersky, C 2008, Market entry strategies: Text, cases and readings in market entry management, Management Laboratory Press, Hamburg.
Neubert, M 2013, Strategies for global markets, McMillan, London.
Tallman, S 2009, Global strategy: Global dimensions of strategy, John Wiley & Sons, Chichester.
Tielmann, V 2010, Market Entry Strategies: International Marketing Management, GRIN Verlag GmbH, München.
Vasudeva, P 2006, International marketing, Excel Books, New Delhi.
Further background details about Kazuri
It is important to note that although all Kazuri products are manufactured in Kenya, the Kenyan market accounts for less that 5% of the firm’s market share. Most of its products are sold in the United States, Canada, Caribbean, Mexico, and South America. All the raw materials are readily available in the country. The products do not involve the use of any form of technology. They are handwork, including the process of polishing the beads. The pictures shown below are the raw materials and the final products made by this company.
Kazuri Raw Materials
Kazuri Finished products